Most people claim Social Security too soon

By Anne Tergesen

When should you claim Social Security? The advice is generally to delay as long as possible. But according to a report issued today by the Government Accountability Office (GAO), middle-income retirees are much less likely than wealthy ones to take that advice.

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Few can hold out to age 67 before collecting.

For many people, it pays to defer claiming Social Security. While it’s possible to claim as early as age 62, for every year you wait between ages 62 and 70, your benefit will rise 6% to 8%. Delaying can make sense even for some who are unlikely to live long. The reason: When the higher earner in a couple delays, the survivor will inherit a higher lifelong income. (When one spouse dies, the other can choose whether to stick with his or her own benefit or switch to the deceased spouse’s.)

But as the GAO report shows, while middle- and lower-income workers would often benefit most from maximizing their Social Security (because they have relatively little in savings), many earners in that group are unable to wait that long.

The good news, according to the report, is that more people are delaying taking Social Security. While 43% of men and 49% of women born in 1935 claimed benefits immediately upon turning 62, for those born in 1946, the percentage who did so fell to 32% for men and 38% for women.

Still, the GAO notes, “62 remains the most prevalent age to claim Social Security benefits, and the large majority of eligible workers claim by their full retirement age.” Among those born in 1946, only 8% of men and 7% of women delayed claiming until age 67 or later, the report says.

Why do so few people delay? The report points to several factors:

As you might expect, those who expect to die sooner, because of a health problem or family history of relatively short lifespans, are more likely to claim earlier.

In some professions, it’s more difficult or even impossible to stay on the job as long as one might like. “Compared to all other occupations, those who held a blue-collar job” were 55% more likely to claim early, the report says. Among construction workers, for example, 49% claimed at age 62. For farmers, an even higher 54% did so. By contrast, among those in managerial and professional occupations, the percentages are far lower – 26% and 22%, respectively.

The unemployed and people with part-time positions are more likely to claim at younger ages. In fact, those with full-time positions are 30% less likely to claim early.

Those with less than a college degree are 23% more likely to claim early.

Widows and widowers are 3.1 and 4.6 times more likely to claim early, respectively.

Those with household wealth in the middle two quartiles – which range from $83,638 to $585,052—are more likely to claim early, compared to those in the highest quartile. “We find the same pattern for total household income at age 60 through 62,” the report says.

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Encore looks at the changing nature of retirement, from new rules and guidelines for financial security to the shifting identities, needs and priorities of people saving for and living in retirement. Our lead blogger is editor Matthew Heimer, and frequent contributors include editor Amy Hoak, writer Catey Hill, and MarketWatch columnists Elizabeth O’Brien, Robert Powell and Andrea Coombes. Encore also features regular commentary from The Wall Street Journal retirement columnists Glenn Ruffenach and Anne Tergesen and the Director of the Center for Retirement Research at Boston College, Alicia H. Munnell.